A statement from the hospital said she passed away peacefully, with her family at her side.

Journalist Barry Everingham, a friend of the McMahons, said she would be remembered as a great woman.

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"She was a giver rather than a taker and she threw herself into any charitable activities that she believed in," Mr Everingham told AAP today.

"She did a lot for a lot of people and a lot of it went unsung."

Lady Sonia was an elegant fashion leader who exuded class, he said.

"She was attractive in every way as a woman, she was well-groomed, she had a great sense of fun, she was absolutely loyal to Sir William McMahon."

Lady Sonia's health began to deteriorate in recent years - she was seriously injured in a fall on a yacht in 2009 and battled cancer - and had reportedly been suffering a second bout of the disease.

She is survived by her three children Melinda, Deborah and US-based actor Julian.

As the prime minister's wife, Lady Sonia was very loyal, often accompanying her husband on official travel and taking residence in Canberra while her young family remained in Sydney's eastern suburbs.

She made international headlines in 1971 during an official visit to the White House, when she wore a daring white dress split up to the armpits on both sides and held together by rhinestones.

An eye-catching socialite even in her later years, she was a stalwart on the Sydney social and racing scene.

Lady Sonia was also committed to charity and social work and was affiliated with several organisations including the Sydney Children's Hospital Foundation and the Australian Cancer Research Foundation.

Standing outside The Lodge in Canberra on Saturday, Prime Minister Kevin Rudd described Lady Sonia as a "distinguished representative of Australia".

"She was a wife of a prime minister of this country, they lived in the house where we are currently standing this morning," he told reporters.

"So I believe appropriate respects should be paid to her family, appropriate respect to the contribution that she and her husband made to Australia, and understand at a purely human level, this is a day of great sadness for any family."

Mr Rudd offered prayers and condolences on behalf of himself and his wife Therese to the McMahon family.